United States v. Righter
United States Court of Appeals for the Eighth Circuit
400 F.2d 344 (1965)
- Written by Eric Miller, JD
Facts
Edna Mersereau’s sister Helen died in 1950. Mersereau threatened to contest the will but reached a resolution with family members through an agreement and trust indenture. Mersereau transferred her 316 shares of stock in the family corporation to a trustee, and her two nephews transferred their 158 shares to the same trustee, although each transferor retained voting rights in his shares. Under the terms of the indenture, Mersereau received dividend payments from the trust corpus—i.e., 474 shares of the stock—for the rest of her life. Mersereau died in 1961, the stock was distributed to her nephews, and federal estate tax was incurred. The Internal Revenue Service (IRS) determined that the consideration received by Mersereau for the transfer of her 316 shares was $35,773.16—that is, the January 1950 value of a life estate in the 158 shares transferred by her nephews. Mersereau’s estate (plaintiff) disputed this determination, arguing that the consideration received was actually $229,890—the total dividends paid to Mersereau from the trust between 1950 and 1961. (Applying the larger amount would have had the effect of reducing the total taxable estate.) The court found in favor of the estate. The IRS—i.e., the United States (defendant)—appealed to the United States Court of Appeals for the Eighth Circuit.
Rule of Law
Issue
Holding and Reasoning (Blackmun, J.)
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